Sheffield Neighborhood News

January/February 2000

Private Mortgage Insurance

BY PAULA ARNETT

A recent federal law makes it easier for new homeowners to cancel their private mortgage insurance (PMI) when it is no longer necessary. The Homeowners Protection Act of 1998 provides for automatic cancellation of private mortgage insurance once the borrower has a 22 percent equity in his home which is reached when he has made enough principal payments. This law applies only to conventionally financed mortgages entered after July 29, 1999.

In addition, the law requires lenders to notify borrowers of their right to cancel their PMI when their equity level reaches 20 percent. Contact your lender to inquire of their procedures to cancel. You will most likely need a current appraisal proving that your home has a less-than 80 percent loan-to-value ratio. Given the rate of appreciation during the last several years, your property will most likely qualify if your current mortgage was made with less than 20 percent down.